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Regulation

Managers will need to prove their worth, U.K. watchdog says

Money managers will need to prove they provide value for money and face increased transparency requirements under measures by the U.K.'s financial watchdog.

The Financial Conduct Authority set out Thursday the latest part of its work to address concerns raised in its Asset Management Market Study last year.

As part of a set of remedies to ensure money managers compete on the value they deliver to clients, as well as acting in clients' best interests, the FCA published final rules focused on the duties of those managers. It also launched a new consultation on proposed rules and guidance regarding information managers provide to investors.

The final rules and guidance require money managers annually assess their value as part of their duty to act in the best interests of investors. They must appoint at least two independent directors to their boards and will face a new responsibility under the Senior Managers and Certification Regime, which will introduce individual focus and accountability, said the FCA.

Further, money managers face technical changes to improve fairness around the way they profit from investors buying and selling their strategies; and also to facilitate the movement of investors into cheaper share classes.

The FCA's new consultation is looking at ways of helping "even actively engaged investors" to better choose among strategies.

Proposals include making strategy objectives clearer and more useful to investors; clarifying when strategies are constrained by benchmarks or limited in terms of how their exposures can differ from a benchmark index; and ensuring that where a strategy uses one or more benchmarks, it is disclosed consistently and explained.

"Today's announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market," said Christopher Woolard, executive director of strategy and competition at the FCA, in a statement accompanying the new rules and consultation.

Managers have 18 months to implement the new rules around assessing value and appointing independent directors; and 12 months regarding the way in which managers profit from investor transactions in strategies.